Parity Won’t ‘Break the Bank’

Colleen L. Barry is an associate professor at the Johns Hopkins Bloomberg School of Public Health.

October 14, 2011

The financial costs of mental illness can be high, even catastrophic.

Former Senate Majority Leader Tom Daschle illustrated this point when describing the case of Senator Paul Wellstone after his death: “Like tens of millions of Americans, Paul Wellstone knew well the anguish that mental illness can cause families. Nearly 50 years ago, when his older brother Stephen was a freshman in college, he suffered a severe mental breakdown. Stephen Wellstone spent the next two years in mental hospitals. Eventually, he recovered and graduated from college — with honors — in three years. But it took his immigrant parents 20 years to pay off the bill from those two years.”

Research has consistently shown minimal spending increases attributable to parity, and significant decreases in family out-of-pocket costs.

In 1999, an important report was released by the Office of the Surgeon General that has since then contributed greatly to the public’s understanding of mental illness. Summarizing a vast body of scientific literature on mental illness, it offered strong evidence that efficacious treatments exist for most disorders.

Despite this information, private insurance coverage for mental health has historically been more limited than for other conditions. Mental health advocates view these limits as discrimination. Economics supplies another explanation for why insurers and employers may under-provide coverage for some conditions because of fears of drawing an adverse selection of risks, even if coverage is valued by enrollees in excess of its costs. The intent of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act passed by Congress in 2008 was to rectify this by requiring insurers to offer mental health benefits on par with other conditions.

A strong federal law was needed because of the limited reach of state mental health benefit mandates. Skeptics argued that parity would “break the bank” by driving up premiums. But, a robust body of research has consistently shown minimal spending increases attributable to parity, and significant decreases in family out-of-pocket costs. The real achievement of Congress’s passage of comprehensive federal parity is that it allows us to focus on other pressing problems in improving care for individuals with mental illness.